foreign investment

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Non-US persons holding US real property affected by PATH Act in 2016

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On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 or PATH Act, which will go into effect mid February (60 days after signing).

As a mechanism to ensure that the US Treasury Department collects tax revenues from non-US persons selling US real property, FIRPTA generally required the buyer of the subject US real property to withhold 10 percent of the purchase price and furnish this amount to the IRS as tax withheld. Accordingly, as a general matter, a non-US person who sold US real property historically received not more than 90 percent of the purchase price. The residual amount of the purchase price could be refunded upon the non-US person`s filing of a US tax return.

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Australia: Purchase of housing for 457 visa holders increased from 1st December

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From 1 December 2015 there will be a fee for all foreign investment applications, including 457 visa holders who wish to purchase a house in Australia.

For a property where the value is up to AUD $1 million, the 457 visa holder will pay the Australian Government an extra AUD $5000 AUD.  This fee will increase according to the value of the property purchased and the relevant fees are tabled below.

 

Why is this happening?

Due to the recent increased scrutiny of overseas citizens purchasing property in Australia without seeking FIRB (Foreign Investment Review Board) approval, it has come to the attention that there has been abuse of the process.

The Australian Government needs money and 457 visa holders are not permitted to vote and so the Australian Government have provided $47.5 million over four years to the Australian Taxation Office (ATO) to improve compliance and strengthen the enforcement of these rules.

 

What does this mean for foreign national and employers?

A Fact Sheet provided by FIRB giving full details of the penalties can be found here.